India seeks 'Data Secure Nation' status, more Hi-end business from European Union

NEW DELHI: New Delhi has demanded that the European Union lift restrictions on flow of sophisticated outsourcing business to India by designating it as a data secure country.

India is among the countries not considered data secure by the EU. This prevents flow of sensitive data, such as patient information for telemedicine, to India under data protection laws in the EU. The issue has been taken up by New Delhi in the bilateral free trade agreement being negotiated, which includes an extensive chapter on free flow of services.

"Recognition as a data secure country is vital for India to ensure meaningful access in cross border supply," a government official told ET, adding, "We have made adequate changes in our domestic data protection laws to ensure high security of data that flows in."

The EU Data Protection Directive requires member countries to ban transfer of personal data to a non-EU country unless the nation ensures adequate privacy protection.

There is an exception to the directive that allows outsourcing to non-data secure countries by adhering to standard contractual clauses that place strict obligations on both parties to ensure privacy of data, but these are onerous and considered as disincentive for business.

Globally, about 42% of IT spending comes from Europe, Middle East and Asia. Lifting of data flow restrictions can boost trade manifold for India's $100-billion IT-BPO industry, 30% of whose exports are to the European market.

"The standard contractual clauses do make life complicated for us. We have been trying to tell the EU that the content of regulation should be important and not the fact that they should match EU's specific way of doing so," said Kamlesh Bajaj, CEO of independent self-regulatory organisation Data Security Council of India.

Much of the business process outsourcing (BPO) work coming to India is low-end, data processing work, the government official pointed out. "Flow of sophisticated outsourced work in the field of health, clinical research, engineering design and intellectual property rights is very less in India and will improve once the country gets a stamp of approval from the EU," the official said.

The level of work being outsourced from the US is high end, which includes clinical trials, legal documents and drug discovery, and credit and equity analytics.

"If European companies start insisting on a data secure status as a critical factor for giving business, it will become a very important criterion for perception of a country," said Ameet Nivsarkar, vice-president of Nasscom. "Nonetheless, most of our companies adhere to very high level of data security," Nivsarkar added.

With the on-going turmoil in the European economy, several companies such as Genpact and EXL are witnessing interest from European firms for outsource and transform businesses, which were traditionally kept in-house.